Impacts of El Niño southern oscillation on hedge strategies for Brazilian corn and soybean futures contracts

George Lucas Máximo Fereira, Julyerme Matheus Tonin and Alexandre Florindo Alves

EconStor Open Access Articles and Book Chapters, 2022, vol. 60, No e250643, 14 pages

Abstract: Climate influences the variations in soybean and corn prices; thus, we assessed the relationship between the El Niño Southern Oscillation (ENSO) with soybean-to-corn price ratio to determine potential impacts on price risk management. The commercial areas of Passo Fundo (RS), Cascavel (PR), Maringá (PR), Uberlândia (Triângulo Mineiro), and Sorriso (MT) covered in the study were chosen according to the MAPA edaphoclimatic classification. To estimate the effectiveness and optimal hedge ratio, the static and generalized model by Myers and Thompson (1989), adapted by Lien and Tse (2000), was used to include the cointegration approach in the analysis. The innovation of this study is the inclusion of the climate variable ENSO in this hedging approach. The findings showed that ENSO, especially La Niña, affects soybean-to-corn price ratio and hedge strategies. These results highlight the need to expand the use of futures contracts to reduce the price risk during the occurrence of ENSO events.

Keywords: Effectiveness; Optimal hedge ratio; Cross hedge (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/342686/1/2 ... acts-ElNi%c3%b1o.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:342686

DOI: 10.1590/1806-9479.2021.250643

Access Statistics for this article

More articles in EconStor Open Access Articles and Book Chapters from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().